Looking beyond the Moscow ring road

May 17, 2010

RBTH

Alexei Chichkin, Rossiyskaya gazeta

Indian businessmen working in Russia have identified the nine constituent regions of the Russian Federation with the best climate for investment.

The Indian Business Alliance (IBA), an association of Indian businessmen in Russia, in April prepared a research report on the financial, economic and social trends in Russia’s regions. The report, signed by IBA Senior Vice-President Atul Khurana, was entitled “Russia is more than just Moscow.”

The report notes in particular: “Russian business is mainly concentrated in Moscow. But Russia effectively only starts outside the Moscow ring road…” Regarding post-crisis recovery, it notes: in the majority of regions this process will take much longer than in Moscow and St Petersburg, since these two megapolises are the biggest financial and economic centres in the country. “Moscow was also ‘awash’ in ‘oil money’, and was one of the most noticeable centres of consumption on the planet. Yet many regions are literally bogged down in oppressive poverty…” According to the report, only 14 out of approximately 80 regions of Russia are still donors to the federal budget. In reality, the oil and gas regions – the Timan-Pechora basin, Tyumen Region, Bashkortostan and Tatarstan – earn big money, along with Moscow and St Petersburg. But this tends to aggravate the economic imbalances between the regions and the problems in Russia’s overall anti-crisis policy.

Regarding regional policy, the report notes that “the government is unhesitatingly putting financial resources into the poorest regions, because the economic recession has increased the pressure on their budgets by reducing their tax revenues. But such ‘injections’ of money into the regions may well make it more difficult to fulfil the government’s $1 trn programme to develop the regional and inter-regional infrastructure.”

Regarding the regional climate for investment, the report identifies the nine regions with the best investment climate, citing recent research by Deutsche Bank: Moscow, Moscow Region, Saint Petersburg, Samara Region, Krasnodar Region, Nizhny Novgorod Region, Tatarstan, Rostov Region and Bashkortostan. According to the Indian analysts’ date, these account for almost half of Russia’s GDP.